The $2 trillion private credit industry in the United States is facing fresh scrutiny after turmoil at Blue Owl Capital, a major alternative lender. What began as mounting questions about valuation practices and disclosure has been compounded by specific credit incidents and by Blue Owl’s recent moves to limit investor withdrawals and sell assets.
Private credit has broadened significantly over the last decade, moving beyond financing leveraged buyouts into lending niches that were historically the preserve of banks. That expansion, combined with growing retail participation and an increasing array of fund structures, has left the market more exposed to strains when a large manager encounters liquidity pressure.
Market participants were already uneasy about valuation transparency and particular problem credits, such as the bankruptcy of auto-parts supplier First Brands, where some private credit funds had exposure. Those concerns have been reinforced by developments at Blue Owl. Late last year the firm restricted withdrawals from one of its funds. In recent days it notified investors it would sell about $1.4 billion of assets across three funds, return a portion of proceeds to certain investors and use some proceeds to reduce debt. In addition, the firm permanently removed a quarterly partial withdrawal option for investors in its smallest vehicle, a fund that mainly serves wealthy individuals.
Blue Owl’s size and its interconnectedness with institutional investors, corporate borrowers and high-net-worth clients make its difficulties noteworthy for the broader market. The firm managed in excess of $300 billion in assets as of December 31, underscoring why its actions have drawn intense investor attention. Blue Owl declined to comment on recent developments.
Credit rating agency Moody’s has said Blue Owl’s shift away from traditional quarterly redemptions has increased scrutiny on how semi-liquid private credit vehicles handle redemptions, particularly as retail investors become more active in the space. Moody’s Vice President Johannes Moller noted that retail investors generally are less patient and less predictable than institutional investors, a dynamic that can magnify redemption pressures.
Those redemption stresses are appearing across segments of private credit. Moody’s highlighted rising pressure at perpetual non-traded loan vehicles and business development companies - fund structures that provide retail and high-net-worth investors access to private credit. The rating agency said that as alternative managers push further into retail channels, issues such as liquidity management, disclosure and fund design will become central considerations for investors and could act as a drag on returns.
Blue Owl’s troubles have coincided with broader market unease. The collapse of UK mortgage provider Market Financial Solutions has added to worries about lending standards and the rapid expansion of private finance. State Street has estimated the addressable market for private credit, including investment-grade credit, at more than $40 trillion, a scale that some market observers say may be working against the asset class as competition increases and underwriting standards are tested.
Investor reactions have been visible in market prices. Blue Owl’s shares have fallen 29% year to date. Other major alternative asset managers have also seen notable declines: Blackstone is down nearly 27%, Apollo Global Management is off more than 26%, and Ares Management has fallen almost 31% this year.
Executives at some of these firms have sought to reassure investors, pointing to portfolio performance and broader market conditions they expect to improve. Ares’ CEO Michael Arougheti told investors the firm enters 2026 in a position of strength, citing strong underlying portfolio performance and a better capital markets and M&A backdrop. Blackstone’s CFO Michael Chae said at a financial conference that credit quality remains strong at his firm but warned that defaults could increase from an extremely low level. Both firms emphasized structural advantages in their credit businesses.
Apollo did not respond to a request for comment. Blackstone and Ares declined to comment for this report but referred to recent public remarks by senior executives highlighting resilience in their credit operations.
Concerns are not limited to liquidity and fund structure. Market participants are also wrestling with valuation uncertainty for software companies that private equity and alternative managers both own and lend to, as developments around artificial intelligence raise questions about possible technology-driven disruption to business models. Christian Hoffmann, head of fixed income at Thornburg Investment Management, said there is a view that technology risk may not have been fully priced in across some holdings compared with several months ago.
The evolution of private credit has also included a shift toward asset-backed finance - loans supported by collateral such as hard assets - and a growing role for banks. JPMorgan Chase set aside $50 billion for direct lending last year, according to recent public disclosures, while other banks have formed partnerships with alternative managers on private credit strategies. A Moody’s report showed U.S. banks had extended nearly $300 billion in loans to private credit providers as of June 2025, had loaned an additional $285 billion to private equity funds, and held roughly $340 billion in unused lending commitments available to these borrowers.
Moody’s projects the private credit industry could double in size to $4 trillion by 2030, but warned that closer ties between private credit funds and traditional banks could amplify contagion risk in a downturn. The interconnections mean that stresses in private credit could have implications for bank balance sheets and for the broader lending environment.
Executives at major banks are monitoring developments closely. Troy Rohrbaugh, co-CEO of JPMorgan Chase’s commercial and investment bank, told investors this week that heightened volatility and an approaching cycle end make such outcomes understandable and that the bank is watching the private credit market closely.
Summary: Blue Owl’s recent liquidity management measures and asset sales have deepened existing concerns about valuation transparency, redemption risk and the capacity of fund structures to absorb shocks. The episode highlights rising ties between private credit funds, retail investors and banks, and has weighed on shares of leading alternative managers.
- Key points:
- Blue Owl has restricted withdrawals, will sell $1.4 billion of assets across three funds, and removed a quarterly withdrawal option in its smallest vehicle.
- Valuation and liquidity concerns have pressured the shares of major alternative asset managers and highlighted risks as retail participation in private credit grows.
- Banks have significantly increased lending to private credit providers, and Moody’s projects the industry could reach $4 trillion by 2030, raising potential contagion concerns.
- Risks and uncertainties:
- Redemption pressure across semi-liquid private credit vehicles could force asset sales or tougher liquidity terms - impacting fund returns and investors with exposure to BDCs and non-traded loan vehicles.
- Valuation stress in technology and software holdings may not be fully reflected, creating uncertainty about mark-to-market and impairments for alternative managers and their lenders.
- Deeper links between private credit funds and banks could heighten contagion risk if defaults rise, affecting bank lending books and available credit for corporates.
Given the breadth of the private credit market, ongoing developments at major managers merit close monitoring by investors, lenders and regulators. The interplay between fund structure design, disclosure practices, and the growing presence of retail capital will likely shape how the asset class navigates liquidity pressures and valuation uncertainties going forward.